With Tencent’s purchase of Riot Games, a sleeping dragon awakens

OK, so it’s not “casual” games news, but what does that mean that team “casual” mean days anyway? In big news that could have a huge impact on the entire games industry, Tencent has acquired Riot Games for $400 million.

Riot Games is the creator of the popular browser-based, online fantasy fighting game League of Legends, boasting more than 1 million active players and logging more than 500 million minutes of game play a month. The company was formed in 2008 to create “session-based” online games.

So what’s the big deal, you ask? One word: Tencent. Tencent isn’t just the largest Internet company in China. It’s the third largest publicly-held company in the world. Yes, I just said it, the world. It’s QQ messaging and Internet service boasts 600 million users in China. Tencent is so big, Facebook will probably have to partner with them to expand into China. In a battle between Zynga and Tencent, Zynga is David, Tencent is Goliath.

And now, they are on a buying spree in an attempt to take over the US market as they dominate the games market in China. Their huge advantage is that they make billions of dollars in their home market of China on virtual goods so they have a huge war chest. The other advantage is that they don’t have to worry about defending their home turf because the Chinese government makes it impossible for non-Chinese Internet and gaming companies to fairly compete in China due to unfair investment and arbitrary censorship rules (China should be sued in the WTO for its unfair tech practices, there I said it).

The geo-political truth aside, US game companies such as Electronic Arts, Activision, Big Fish Games, and Zynga, have a lot to fear with Tencent expanding into the US market.

Tencent is a like a huge sleeping dragon that is awakening. They are bringing with them tons of money to buy US companies and a freemium business model that works splendidly in China and increasingly, is become the norm in the US (with Facebook, iOS, and Android).

The result may be the final death knell of the retail games market, the end of the Electronic Arts and Activision quasi-video game monopoly, and a truly global games market where it’s not a given that US companies dominate.